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Old 07-15-2010, 09:47 PM
 
Location: Finally escaped The People's Republic of California
11,269 posts, read 8,630,539 times
Reputation: 6390

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Actually posted this over on the Retirment Forum first
Where I work we have a defined benifit Pension Plan, alot of the guys fixing to retire are taking the Lump Sum option instead of a monthly payment, They claim to "not trust the Company" Now this is a fortune 500 company, with a fully funded Pension Plan....
I did a little math, If I took the Lump Sum, I would have to make 7% interest to get what the monthly payment is...the best I could find today was 4%... So tell me why take the lump??
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Old 07-16-2010, 12:20 AM
 
Location: Great State of Texas
86,052 posts, read 84,246,121 times
Reputation: 27718
Well..if the company goes belly up then pensions go to the PBGC

Pension Benefit Guaranty Corporation (PBGC)

There is also a max that they will pay out regardless of what the company paid pension amount was before bankruptcy.

Maximum monthly guarantee tables (PBGC.gov)

Now..are they retiring early..55 ? Do you think your company will last for 30 more years ?

Look what happened to GM non-union pensioners:
Non-union, salaried workers shafted in U.S. deal with GM - TheHill.com

Also just look at any teacher pension fund across the US..they have lost money and are woefully underfunded.

If you take the lump sum..it's YOUR money to do with what you will.
If you stay with your company, you are at their mercy and you have to have faith they will be there for the next 30-40 years to pay you.

I'm in a big company and I've watched them widdle away at retirement pensions and health insurance over the years (20 years).

You might want to look at Immediate Annuities if you were to take a lump sum and compare the monthly output from each.

Basically your decision to stay with them or take the lump sum should be based on your knowledge and faith that they will be there for the next 30-40 years to mail you that monthly check.
While they may be fulled funded now the future is anyone's guess.
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Old 07-16-2010, 04:36 AM
 
Location: Pennsylvania
5,725 posts, read 11,679,267 times
Reputation: 9828
+1 to HappyTexan. Given the opportunity (I don't have one but the wife has a defined pension from a previous job) I'd take the lump sum and manage it conservatively over the risk of leaving it in the hands of others who may or may not do a good job.
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Old 07-16-2010, 05:34 AM
 
630 posts, read 1,870,293 times
Reputation: 368
Ask my Father in Law,Pan Am's fifth senior 74 captain in '91 whether you should take a lump sum distibution !!! LOL, Doesn't matter, if I had his money, I'd burn mine for heat in winter !!!!!
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Old 07-16-2010, 07:12 AM
 
20,187 posts, read 23,780,739 times
Reputation: 9283
I hope when you take the lump sum, you are in a state that doesn't tax pensions because it seems a lot of states will tax pensions to some degree and there are few that won't tax them at all... before you get the lump, might want to relocate for the lump sum... of course the federal government will want their "fair" share hehehehehehehhe.... taking a lump sum may owe higher federal taxes than you would otherwise pay with a monthly benefit... most people can't handle lump sums, cause they go on a spending binge... the monthly benefit will protect you against spending beyond your means...
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Old 07-17-2010, 07:24 PM
 
48,505 posts, read 96,610,333 times
Reputation: 18304
Quote:
Originally Posted by HappyTexan View Post
Well..if the company goes belly up then pensions go to the PBGC

Pension Benefit Guaranty Corporation (PBGC)

There is also a max that they will pay out regardless of what the company paid pension amount was before bankruptcy.

Maximum monthly guarantee tables (PBGC.gov)

Now..are they retiring early..55 ? Do you think your company will last for 30 more years ?

Look what happened to GM non-union pensioners:
Non-union, salaried workers shafted in U.S. deal with GM - TheHill.com

Also just look at any teacher pension fund across the US..they have lost money and are woefully underfunded.

If you take the lump sum..it's YOUR money to do with what you will.
If you stay with your company, you are at their mercy and you have to have faith they will be there for the next 30-40 years to pay you.

I'm in a big company and I've watched them widdle away at retirement pensions and health insurance over the years (20 years).

You might want to look at Immediate Annuities if you were to take a lump sum and compare the monthly output from each.

Basically your decision to stay with them or take the lump sum should be based on your knowledge and faith that they will be there for the next 30-40 years to mail you that monthly check.
While they may be fulled funded now the future is anyone's guess.
Many recent took a lump sum because they thoguht looking at their say IRA they could do better. many where very disappointed.Pension plan themself vary as to howits invested and the risk.
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Old 07-18-2010, 07:58 AM
 
Location: In America's Heartland
929 posts, read 2,088,038 times
Reputation: 1196
Fortune 500 Co. means nothing. I would take the lump sum and be in control of your nest egg.
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Old 07-18-2010, 08:02 AM
 
8,263 posts, read 12,166,827 times
Reputation: 4800
TexDav = yup! My wife has a pension plan but her lump sum is her contributions plus a 100% match by the company, and they give her 8% interest on that. As long as they are giving an 8% interest rate we'll leave money in there, that's better than any guaranteed rate of return we could get.
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Old 07-18-2010, 02:04 PM
 
13,811 posts, read 27,349,266 times
Reputation: 14244
With some smart dividend stock buys in todays market you could probably come close to 5.5%-6% return, and that would just increase YOY as the dividend payouts increase.

I did the math and one company I was looking at had a 30 year history of increasing dividend payouts, and by increasing it at 1/2 the rate they historically do I was looking at a 20% ROI in 30 years. Can't remember the company now though, it was I believe an electric utility.
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